Who Is Cheating Who In College Sports?

Head coach John Calipari of the Kentucky Wildcats with PJ Washington during an NCAA tournament game. If Kentucky paid Washington what he was worth, Calipari would likely get less. (Photo by Ronald Martinez/Getty Images)(Photo by Ronald Martinez/Getty Images)

Yet another commission has been formed to stop cheating in college sports. But this commission — like all other reform efforts before — will likely fail because it has failed to answer a simple question: Who is cheating who in college sports?

The answer starts with the very beginnings of the business of college sports. In 1880, a college football game was played in New York City to decide the championship of an association formed by Princeton, Yale, Harvard and Columbia. The game attracted only 5,000 fans, and the schools each received $320 (a bit more than $6,000 in today's dollars). From these very modest beginnings, commercial college sports essentially began. As Dave Resvine notes, by the 1890s, the crowds at college football games were 10 times larger and gate revenue was more than 50 times bigger. And when college sports became a big business that decade, a decision had to be made.

Who should get all the revenue that college sports are generating?

Any firm that generates revenue has to decide how much of that revenue should go to the workers and how much should go to the owners. Traditionally a firm can't completely control precisely how much revenue goes to workers because firms face some competition for the services of their employees. The NCAA, though, has apparently found a way around this tradition. In college sports, the workers are labeled "student-athletes," and those student-athletes are completely under the control of NCAA rules.

The term "student-athlete" was invented by Walter Byers (the NCAA's first executive director) in the 1950s in an effort to address a workmen's-compensation case. If college athletes were employees, then colleges would be financially responsible if workers were injured on the job. By labeling these workers "student-athletes," the NCAA was successfully able to avoid labor laws that governed how firms had to address worker injury.

Although this label has stuck, it's seems clear "student-athletes" are employees. Clearly the athlete is hired to do a specific job. Just as clearly, the athlete is directed in their job by a superior, and the athlete does receive some compensation for their efforts. In sum, these are employees. But by labeling these workers "student-athletes," colleges are able to completely control the compensation of these workers.

Recently, Condoleezza Rice, head of the Commission on College Basketball, argued, "The corruption we observed in college basketball has its roots in youth basketball."

Unfortunately, this is not likely to be true. Although the NCAA might want to look everywhere but at itself, the supposed corruption we see in college sports seems to be entirely about how the NCAA has chosen to compensate its athletes.

This is not a very hard argument to follow. Because the compensation of athletes is often well below the amount of revenue the athletes generate for their schools, there has always been a huge incentive to give the athletes some sort of additional payment to get the athlete to choose a specific school. The NCAA has traditionally called these additional payments "corruption." The traditional response to this "corruption" is to form commissions and adopt rules to stop schools from responding to their incentives.

So it's not surprising that in response to yet another wave of schools responding to incentives (i.e., cheating), the NCAA has formed yet another commission to solve what it perceives as a problem. But the "Sanity Code" of 1948 and the various reports from the Knight Commission over the years never addressed the fundamental problem in college sports. As long as athletes generate more revenue than they receive in compensation, there will be an incentive for schools to increase the compensation to athletes beyond what the rules allow.

The latest commission, led by Rice, offers a new assortment of reforms and rules. But its report fails at the outset by making the following statements:

Lost in the talk of big money and corruption is colleges’ central mission to provide higher education to students.

The Commission believes that the answer to many of college basketball’s problems lies in a renewed commitment to the college degree as the centerpiece of intercollegiate athletics. Intercollegiate athletics is a trust based on a promise: Athletes play for their schools and receive a realistic chance to complete a college degree in return

College basketball, like college sports generally, is to be played by student-athletes who are members of the collegiate community, not paid professionals.

These three statements capture the NCAA approach. Compensation to athletes is limited to an education. And this limit remains despite all the money involved in college sports.

The NCAA argues that when a school attempts to give these athletes additional money, it is cheating. But one could also argue that it is the NCAA rules that are cheating these athletes out of the revenue they are generating. And there is a huge incentive for the NCAA not to change these rules.

And this is why true reform is probably not coming to the NCAA anytime soon. The problem isn't youth basketball. It's not the shoe companies. It's not even a few bad coaches. As long as players generate more revenue than they are paid, there will be an incentive for teams to find a way to send more money to players than they are allowed by NCAA rules.

To fix that problem, the NCAA has to allow the market to decide what each player should receive. For some players, a scholarship is all that would be needed to get the player to campus. But for others, more money would be required. By allowing the schools and players to decide the level of compensation, all cheating — by both the NCAA and the schools — would be effectively ended.

Unfortunately, that approach would also mean a coach like Calipari would end up with substantially less. Because coaches and other college employees who financially benefit from the current system don't want to settle for less, it is not likely the NCAA will ever truly reform its system. And that means we can expect more "corruption" in the future. This "corruption" will then lead to more commissions and more rules.

All of this is simply part of the NCAA tradition. It has been going on for decades. And until the NCAA truly addresses the exploitation of student-athletes, it promises to continue into the future.

I am a professor of economics at Southern Utah University who has spent the last two decades researching sports and economics. I am the lead author of "The Wages of Wins" (Stanford Press, 2006) and "Stumbling on Wins" (Financial Times Press, 2010). In addition, I am the so...